[FORM OF AMENDED AND RESTATED WARRANT]
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR
SOLD, UNLESS THEY HAVE BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND THEN
ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SECURITIES
PURCHASE AGREEMENT DATED AS OF AUGUST 16, 1999, AS AMENDED ON JANUARY __, 2000,
A COPY OF WHICH MAY BE OBTAINED FROM PARTY CITY CORPORATION AT ITS PRINCIPAL
OFFICE.
PARTY CITY CORPORATION
WARRANT TO PURCHASE COMMON STOCK
No. W-__ January __, 2000
THIS AMENDED AND RESTATED WARRANT ("Warrant") of Party City Corporation, a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), shall amend, restate and supersede that certain warrant of the
Company, dated as of August 16, 1999, bearing the same number as this Warrant.
The Company acknowledges that the effective issuance date of the Warrant shall
continue to be deemed to be August 16, 1999.
This Warrant entitles ______________ or its transferees and assigns
(collectively, the "Holder"), for value received, to purchase from the Company
during the period commencing as of the date hereof and ending at 5:00 p.m. (New
York City time) on August 16, 2006 (the "Expiration Date") __________________
(______) shares of Common Stock, par value $0.01 per share, of the Company (the
"Common Stock" and such number of shares, as adjusted, being referred to herein
as the "Shares") at a price of $1.07 per share (as adjusted, the "Exercise
Price").
The Holder of this Warrant agrees with the Company that this Warrant is
issued and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Exercise of Warrant.
1.1. Exercise by Payment of Cash or Surrender of Notes. The Holder may
exercise this Warrant at any time or from time to time on any business day prior
to or on the Expiration Date, for the full or any lesser number of shares of
Common Stock purchasable hereunder, by surrendering this Warrant to the Company
at its principal office, together with a duly executed Notice of Exercise (in
substantially the form attached hereto as Annex I), and:
(a) payment in cash or by check of the aggregate Exercise Price
then in effect for the number of shares for which this Warrant is being
exercised; or
(b) the surrender for cancellation at the principal office of the
Company of any Note (as defined in that certain Securities Purchase
Agreement dated as of August 16, 1999 by and among the Company and certain
investors named therein, as amended on January __, 2000
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(collectively, the "Purchase Agreement")) or portion thereof, in a
principal amount equal to the Exercise Price then in effect for the number
of shares for which this Warrant is being exercised.
Promptly after such exercise, the Company shall issue and deliver to
the Holder a certificate or certificates representing the number of shares of
Common Stock issuable upon such exercise. Upon issuances by the Company in
accordance with the terms of this Warrant, all such shares of Common Stock shall
be validly issued, fully paid and non-assessable, and free from all taxes, liens
and encumbrances with respect to the issuance thereof, except as set forth in
the Company's Certificate of Incorporation or bylaws, each as may be amended,
any applicable restrictions on sale set forth therein or pursuant to federal or
state securities laws and any restrictions on transfer set forth herein, in the
Purchase Agreement or in that certain Investors Rights Agreement by and among
the Company, the Holder and the other parties set forth therein (the "Investors
Rights Agreement"). To the extent permitted by law, this Warrant shall be deemed
to have been exercised immediately prior to the close of business on the date of
its surrender for exercise as provided herein, even if the Company's stock
transfer books are at that time closed and the Holder shall be treated for all
purposes as the holder of record of the Common Stock to be issued upon such
exercise as of the close of business on such date. Upon any exercise of this
Warrant for fewer than all Shares represented by this Warrant, the Company shall
cancel this Warrant and execute and deliver a new Warrant or Warrants in
substantially identical form for the remaining shares of Common Stock subject to
this Warrant.
1.2. Net Issue Exercise. Notwithstanding any provisions herein to the
contrary, if the Current Market Price (as defined in Section 2.5 hereof) of one
share of the Company's Common Stock is greater than the Exercise Price (at the
date of calculation as set forth below), in lieu of exercising this Warrant by
payment with cash, certified or cashier's check, the Holder may elect to make a
cash-free exercise of this Warrant and thereby to receive Shares equal to the
value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Notice of Exercise and notice of such
election, in which event the Company shall issue to the Holder a number of
Shares of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares of Common Stock to be
issued to the Holder
Y = the gross number of Shares of Common Stock
purchasable under this Warrant or, if only a
portion of this Warrant is being exercised,
the gross number of Shares purchased under
this Warrant being canceled (at the date of
such calculation)
A = the Current Market Price (as defined in
Section 2.5 hereof) of one share of the
Company's Common Stock (at the date of such
calculation)
B = Exercise Price (as adjusted to the date of
such calculation)
2. Adjustment of Exercise Price and Number of Shares Issuable. The Exercise
Price and the number of Shares issuable upon the exercise of the Warrant are
subject to adjustment from time to time upon the occurrence of the events
enumerated in this Section 2. For purposes of this Section 2, "Common Stock"
means shares now or hereafter authorized of any class of common stock of the
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Company and any other stock of the Company, however designated, that has the
right (subject to any prior rights of any class or series of preferred stock) to
participate in any distribution of the assets or earnings of the Company without
limit as to per share amount.
2.1 Adjustment for Change in Capital Stock. If the Company:
(a) declares or pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(b) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(c) combines its outstanding shares of Common Stock into a
smaller number of shares;
(d) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock or preferred stock; or
(e) issues by reclassification of its Common Stock any shares of
its capital stock;
then the Exercise Price and the number and kind of shares of capital stock of
the Company issuable upon the exercise of the Warrant as in effect immediately
prior to such action shall be proportionately adjusted so that the Holder may
receive the aggregate number and kind of shares of capital stock of the Company
which the Holder would have owned immediately following such action if the
Warrant had been exercised immediately prior to such action. The adjustment
shall become effective immediately after the record date in the case of a
dividend or distribution and immediately after the effective date in the case of
a subdivision, combination or reclassification.
If after an adjustment the Holder upon exercise of the Warrant
may receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation, which shall be made by the
Board of Directors of the Company in good faith and on a reasonable basis, the
exercise privilege and the Exercise Price of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those applicable to
Common Stock in this Section 2.
The above adjustments shall be made successively whenever any
event listed above shall occur.
2.2 Adjustment for Rights Issue. If the Company sets a record date for
the distribution of any rights, options or warrants to all holders of its Common
Stock entitling them for a period expiring within sixty (60) days after the
record date mentioned below to purchase shares of Common Stock at a price per
share less than the Current Market Price per share on that record date, the
Exercise Price shall be adjusted in accordance with the formula:
O+(N x P)
E'=Ex M
---------
O+N
Where E'= the adjusted Exercise Price.
E = the current Exercise Price.
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O = the number of shares of Common Stock outstanding
on the record date.
N = the number of additional shares of Common
Stock offered pursuant to such rights
issuance.
P = the offering price per share of the additional
shares.
M = the Current Market Price per share of Common
Stock on the record date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If no rights, options or warrants are distributed
or at the end of the period during which such rights, options or warrants are
exercisable, not all rights, options or warrants shall have been exercised, the
Exercise Price shall be immediately readjusted to what it would have been if "N"
in the above formula had been the number of shares actually issued.
2.3 Adjustment for Certain Other Distributions. If the Company sets a
record date for distribution to all holders of its Common Stock any of its
assets (including but not limited to cash, but excluding ordinary dividends),
debt securities, preferred stock, or any rights or warrants to purchase debt
securities, preferred stock, assets or other securities of the Company, the
Exercise Price shall be adjusted in accordance with the formula:
E'=Ex(M - F)
-------
M
Where E'= the adjusted Exercise Price.
E = the current Exercise Price.
M = the Current Market Price per share of
Common Stock on the record date mentioned
above.
F = the fair market value on the record date
of the assets, securities, rights or
warrants applicable to one share of Common
Stock. The Board of Directors shall
determine the fair market value in good
faith and on a reasonable basis.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
If such distribution is not made, the Exercise Price shall be immediately
readjusted to what it would have been without regard to such distribution.
This subsection does not apply to rights, options or warrants referred
to in Section 2.2.
2.4 Adjustment for Distribution in Settlement of Legal Claims. In the
event the Company agrees to issue, grant or otherwise distribute shares of its
Common Stock or any securities exercisable for, or exchangeable into, shares of
its Common Stock in respect of any claims by its stockholders under that certain
litigation filed in the United States District Court for the District of New
Jersey under the caption In re Party City Corp. Securities Litigation, or other
claims from stockholders of the Company arising out of similar facts or
circumstances, the number of shares of Common Stock (calculated to the nearest
hundredth) issuable upon exercise of this Warrant and the Exercise Price shall
be adjusted in accordance with the following formulas:
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N'=N+(S * N)
-------
I
E'=E*N
---
N'
Where N'= the adjusted number of Shares issuable
upon exercise of the Warrant by payment of
the adjusted Exercise Price.
N = the number of Shares issuable upon
exercise of the Warrant prior to the
adjustment.
S = the number of shares of Common Stock
issued in respect of the claim (or shares of
Common Stock issuable upon conversion of
securities issued in respect of the claim).
I = the aggregate number of issued and
outstanding shares of Common Stock prior to
the issuance of shares of Common Stock (or
convertible securities) in respect of the
claim.
E'= the adjusted Exercise Price.
E = the current Exercise Price.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
If such distribution is not made, the Exercise Price shall be immediately
readjusted to what it would have been without regard to such distribution.
2.5 Current Market Price. The "Current Market Price" per share of the
Common Stock is the last reported sales price of the Common Stock as reported by
the Nasdaq National Market ("NMS"), or the primary national securities exchange
on which the Common Stock is then quoted; provided, however, that if the Common
Stock is neither traded on the NMS nor on a national securities exchange, the
price referred to above shall be the price reflected on Nasdaq, or if the Common
Stock is not then traded on Nasdaq, the price reflected in the over-the-counter
market as reported by the National Quotation Bureau, Inc. or any organization
performing a similar function, and provided, further, that if the Common Stock
is not publicly traded, the Current Market Price of the Common Stock shall be
the fair market value as determined in good faith by the Board of Directors of
the Company.
2.6 When De Minimis Adjustment May Be Deferred. No adjustment in the
Exercise Price and/or the number of Shares subject to this Warrant shall be made
if such adjustment would result in a change in (a) the Exercise Price of less
than one cent ($0.01) per share or (b) the number of Shares represented by this
Warrant of less than one share (the "Adjustment Threshold Amount"). Any
adjustment not made because the Adjustment Threshold Amount is not satisfied
shall be carried forward and made, together with any subsequent adjustments, at
such time as (i) the aggregate amount of all such adjustments is at least equal
to the Adjustment Threshold Amount or (ii) this Warrant is exercised.
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2.7 When No Adjustment Required.
(a) No adjustment need be made for a transaction referred to in
Sections 2.1, 2.2 or 2.3 to the extent the Holder participates in the
transaction by virtue of the Holder's position as the holder of this Warrant.
(b) No adjustment need be made for rights to purchase Common
Stock pursuant to a Company plan for reinvestment of dividends or interest
approved by the Board of Directors of the Company.
(c) No adjustment need be made for a change in the par value or
no par value of the Common Stock.
2.8 Voluntary Reduction. The Company from time to time may reduce the
Exercise Price by any amount for any period of time if the period is at least
twenty (20) days and if the reduction is irrevocable during the period;
provided, however, that in no event may the Exercise Price be less than the par
value of a share of Common Stock.
Whenever the Exercise Price is reduced, the Company shall provide the
Holder a notice of the reduction. The Company shall provide notice at least
fifteen (15) days before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period it will be in
effect.
A reduction hereunder of the Exercise Price does not change or adjust
the Exercise Price otherwise in effect for purposes of Sections 2.1, 2.2 and
2.3.
2.9 Notice of Certain Transactions. If:
(a) The Company takes any action that would require an adjustment
in the Exercise Price pursuant to Sections 2.1, 2.2 or 2.3;
(b) The Company takes any action that would require a
supplemental Warrant pursuant to Section 2.10; or
(c) there is a liquidation or dissolution of the Company;
the Company shall provide the Holder a notice stating the proposed record date
for a dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall provide notice at least fifteen
(15) days before such date. Failure to provide the notice or any defect in it
shall not affect the validity of the transaction or the rights of the Holder
hereunder.
2.10 Reorganization of Company. If the Company consolidates or merges
with or into, or transfers or leases all or substantially all its assets to, any
person, upon consummation of such transaction the Warrant shall automatically
become exercisable for the kind and amount of securities, cash or other assets
which the Holder would have owned immediately after the consolidation, merger,
transfer or lease if the Holder had exercised the Warrant immediately before the
effective date of the transaction. Concurrently with, and as a condition to
effectiveness of, the consummation of such transaction, the corporation formed
by or surviving any such consolidation or merger if other than the Company, or
the person to which such sale or conveyance shall have been made, shall enter
into a supplemental Warrant so providing and further providing for adjustments
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which shall be as nearly equivalent as may be practical to the adjustments
provided for in this Section 2. The successor Company shall provide the Holder a
notice describing the supplemental Warrant.
If the issuer of securities deliverable upon exercise of Warrants
under the supplemental Warrant is an affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the supplemental
Warrant.
If this Section 2.10 applies, Sections 2.1, 2.2 and 2.3 do not apply.
2.11 Company Determination Final. Any determination that the Company
or the Board of Directors must make pursuant to this Section 2 must be made by
consent of at least three-fourths of the members of the Board of Directors. Any
such determination shall be deemed presumptively correct absent manifest error.
2.12 Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to this Section 2, the Warrant shall thereafter evidence
the right to receive upon payment of the adjusted Exercise Price that number of
shares of Common Stock (calculated to the nearest hundredth) obtained from the
following formula (other than Section 2.4 in which case the number of Shares
will be adjusted in accordance with the provisions of said section):
N'= N x E
---
E'
Where N'= the adjusted number of Shares issuable
upon exercise of the Warrant by payment of
the adjusted Exercise Price.
N = the number or Shares previously issuable
upon exercise of the Warrant by payment of
the Exercise Price prior to adjustment.
E'= the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
2.13 Notice of Adjustment of Exercise Price. Whenever the Company
shall take any action resulting in any adjustment provided for in this Section
2, the Company shall forthwith deliver or cause to be delivered notice of such
action to the Holder, which notice shall set forth the number of Shares then
subject to the Warrant and the purchase price thereof resulting from such
adjustment. Written notice shall be delivered in accordance with the provisions
of Section 10.
3. Rights of the Holder.
3.1 No Rights as Stockholder. The Holder shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in this
Warrant. Nothing contained in this Warrant shall be construed as conferring upon
the Holder the right to vote or to consent or to receive notice as a stockholder
of the Company on any matters or with respect to any rights whatsoever as a
shareholder of the Company. No dividends or interest shall be payable or accrued
in respect of this Warrant or the interest represented hereby or the shares of
Common Stock purchasable hereunder until, and only to the extent that, this
Warrant shall have been exercised in accordance with its terms.
H-II-7
3.2 Registration Rights. The Holder shall have those registration
rights and obligations as defined in the applicable provisions of the Investor
Rights Agreement.
4. No Impairment. The Company will not, by any voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but shall at all times in good faith assist in effecting the terms of this
Warrant and in taking all actions necessary or appropriate in order to protect
the rights of the Holder against dilution or other impairment of its rights
hereunder.
5. No Fractional Shares. No fractional shares shall be issued upon exercise
of this Warrant. In lieu of issuing any fractional share, the Company shall pay
the Holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the Current Market Price.
6. Reservation of Stock Issuable upon Exercise of Warrant. The Company
covenants and agrees that during the period of time during which this Warrant is
exercisable, it will at all times have authorized and reserved solely for
issuance and delivery upon the exercise of this Warrant, all such shares of
Common Stock and other stock, securities and property as from time to time are
receivable upon the exercise of this Warrant. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the exercise of this Warrant, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes. The Company further covenants that all shares issuable upon
exercise of this Warrant and payment of the Exercise Price, all as set forth
herein, will be free from all taxes, liens and charges in respect of the issue
of such shares (other than taxes in respect of any transfer occurring
contemporaneously with such exercise and payment or otherwise specified herein).
The Company agrees that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for Shares of
Common Stock upon the exercise of this Warrant and covenants that all such
Shares, when issued, sold and delivered in accordance with the terms of this
Warrant for the consideration expressed herein, will be duly and validly issued,
fully paid and nonassessable, and will be free of restrictions on transfer other
than restrictions on transfer set forth in this Warrant and applicable state and
federal securities laws.
7. Issue Tax. The issuance of certificates for shares of Common Stock upon
the exercise of this Warrant shall be made without charge to the Holder of this
Warrant for any issue tax (other than applicable income taxes) in respect
thereof, provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of this
Warrant being exercised.
8. Transfer Restrictions. This Warrant may be transferred in whole or in
part. Any transfer of this Warrant permitted under this Section 8 shall be made
only upon surrender for exchange of this Warrant (in negotiable form, if not
surrendered by the Holder named on the face hereof) to the Company at its
principal office, in which event the Company will issue and deliver a new
Warrant or Warrants in substantially identical form representing in the
aggregate, the same number of shares of Common Stock, in the denomination or
denominations requested, to or on the order of such Holder upon payment by such
Holder of any applicable transfer taxes; and provided further that all
reasonable expenses incurred in connection with such re-issuance and delivery
shall be borne by the Holder. The terms of this Warrant shall be binding upon
the executors, administrators. heirs, successors and assigns of the Holder.
9. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant,
and (in the case of loss, theft or
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destruction) upon delivery of an indemnity agreement in such reasonable amount
as the Company may determine, or (in the case of mutilation) upon surrender and
cancellation hereof, the Company, at its expense, shall issue a new Warrant in
substantially identical form in replacement hereof.
10. Notices. Notices and other communications under this Warrant shall be
in writing and shall be delivered by facsimile transmission, hand or courier
service, or mailed by registered or certified mail, return receipt requested,
addressed, (a) if to the original Holder, at the address set forth in Schedule A
to the Purchase Agreement or at such other address as the Holder shall have
furnished to the Company in writing, or (b) if to any other Holder, at such
address as such other Holder shall have furnished to the Company in writing, or,
until any such other Holder so furnishes to the Company an address, then to and
at the address of the last Holder of such Note who has furnished an address to
the Company, or (c) if to the Company, at its address set forth in the Purchase
Agreement, to the attention of Corporate Secretary, or at such other address, or
to the attention of such other officer, as the Company shall have furnished to
the Holder in writing. Any notice so addressed and delivered by facsimile
transmission, hand or courier shall be deemed to be given when received, and any
notice so addressed and mailed by registered or certified mail shall be deemed
to be given three business days after being so mailed.
11. Governing Law. This Warrant shall be construed in accordance with and
governed by the laws of the State of New York.
12. Expiration Date. If the last day on which this Warrant may be
exercised, or on which it may be exercised at a particular Exercise Price, is a
Saturday, Sunday or a legal holiday or a day on which banking institutions doing
business in Los Angeles or the City of New York are authorized by law to close,
this Warrant may be exercised prior to 5:00 p.m. (New York City time) on the
next full business day with the same force and effect and at the same Exercise
Price as if exercised on such last day specified herein.
13. Modification and Waiver. The terms of this Warrant or any term hereof
may be changed, waived, discharged or terminated only by the written consent of
the Holder.
14. Headings. The descriptive headings in this Warrant are included for
convenience only, and do not constitute a part hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and delivered on the date first set forth above.
PARTY CITY CORPORATION
000 Xxxxxxx Xxx
Xxxxxxxx, Xxx Xxxxxx 00000
By:
------------------------------
Name:
Title:
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Annex I
NOTICE OF EXERCISE
(To be signed only upon exercise of Warrant)
To: Party City Corporation
000 Xxxxxxx Xxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attn: Corporate Secretary
The undersigned, Holder of the attached Warrant No. W-____, hereby
irrevocably elects to exercise the purchase right represented by this Warrant as
follows:
[ ] The undersigned elects to purchase _________ shares of Common Stock of
Party City Corporation for cash or check and herewith makes payment of
$_______ for those shares.
[ ] The undersigned elects to purchase _________ shares of Common Stock of
Party City Corporation through the surrender of Notes (as such term is
used in the Warrant) in the principal amount of $_______ as payment
for those shares.
[ ] The undersigned elects to effect a net exercise of this Warrant,
exercising this Warrant as to the following gross number of shares:
___________. The undersigned understands that the actual number of
shares issuable will be determined in accordance with Section 1.2 of
this Warrant.
The undersigned requests that the certificates for the shares be issued in
the name of, and delivered to, _______________________________________________*,
whose address is ___________________________________________.
Dated: ___________, ____ _____________________________
Signature
(Signature must conform in all respects
to name of Xxxxxx as specified on the
face of the attached Warrant.)
Holder: ________________________________
By: ____________________________________
Title: _________________________________
________________________________________
Address
________________________________________
________________________________________
* If the stock is to be issued to anyone other than the registered Holder of
this Warrant, this Notice of Exercise must be accompanied by an opinion of
counsel to the effect that such transfer may be effected without compliance with
the registration and prospectus delivery requirements of the Securities Act of
1933, as amended.
